BMW AG, the world’s largest maker of luxury cars, signed an agreement with its Chinese partner Brilliance Auto to invest $735 million to expand the capacity of their joint venture in China, Reuters reported last week.
On the other hand, apart from output, profit and market share, Brilliance has one more to desire — reputation. Brilliance is now at the risk of being retooled by FAW if it can not save itself from the crisis, while the threat also comes from SAIC, a potential invader into the relationship between Brilliance and BMW.
Reportedly this deal is not an overnight decision but takes 3 years. Early in 2006 there was a rumor of the capacity expansion of BMW in China, along with another rumor that BMW may change its Chinese partner from Brilliance to SAIC, China’s biggest domestic auto maker. The recent agreement has at least put a temporary end to this 3 years chase game.
For Brilliance, chances and time are still left to prove its performance.
The new investment includes expanding an existing plant in the northeastern Chinese city of Shenyang. The annual output will increase to 75,000 units by the end of next year, from current 30,000 units.
As Audi’s parent Volkswagen AG gained early entry into China, the world’s most populous nation and established a market lead there. BMW is still playing catch-up in China with this smaller rival. It seems BMW can’t wait any long.
Construction on the second plant is scheduled to start in 2010 with a planned annual production capacity of 100,000 units, according to Qi Yumin, the chairman of Brilliance Group. This may buoy BMW’s profit up and satisfy its long-awaited bigger output and market share.